Saudi Arabia on Monday announced it had signed an agreement with Türkiye to deposit $5 billion (TL 94.57 billion) in the country’s central bank, in a significant boost as the economy grapples with inflation emerging from last month’s massive earthquakes ahead of presidential elections.
The kingdom described the move as "a testament to the close cooperation and historical ties between the Kingdom of Saudi Arabia and the Republic of Türkiye and its brotherly people."
It also marks "a demonstration of the Kingdom of Saudi Arabia’s commitment to supporting Türkiye’s efforts to strengthen its economy and to promote social growth and sustainable development," the Saudi Fund for Development (SFD) said in a statement.
Saudi Minister of Finance Mohammed bin Abdullah Al-Jadaan announced his country’s intention to deposit in December.
The statement offered no details on how the cash would be used or if the kingdom could call for the sum to be returned. However, such deposits can help firm up exchange rates for a nation’s currency against other currencies internationally.
Türkiye’s net foreign exchange reserves rebounded from over $6 billion last summer, when it was at its lowest in at least 20 years, while they have declined some $8.5 billion since devastating earthquakes hit the country’s southern region early in February, killing more than 45,000 people and leaving millions homeless.
The Central Bank of the Republic of Türkiye’s (CBRT) net international reserves fell some $1.4 billion to $20.2 billion in the week of Feb. 24, data from the monetary authority showed on Thursday.
The deposit will shore up Türkiye’s foreign reserve and is likely to help further firm up the Turkish lira. The currency depreciated 30% against the U.S. dollar last year and 44% in 2021.
The decision, which is also expected to help Türkiye combat inflation, was made on the order of King Salman and Crown Prince Mohammed bin Salman (MBS), the statement said.
"The deposit will bolster the Turkish economy by addressing economic aspects across various sectors. By making this deposit, the Kingdom of Saudi Arabia is expressing its strong support for the Turkish people and its confidence in the future of the Turkish economy," it noted.
The Saudi deposit follows joint efforts by Ankara and Riyadh to mend ties following years of tension, which escalated significantly after the 2018 murder of dissident Saudi journalist Jamal Khashoggi in Saudi Arabia’s Istanbul Consulate.
President Recep Tayyip Erdoğan’s visit to Saudi Arabia in April last year marked the first high-level visit in years. His trip was followed by MBS’s trip to Türkiye in June.
The two leaders also met in November on the sidelines of the G-20 summit in Bali, Indonesia.
The deposit was signed between SFD Chairperson Ahmed Aqeel Al Khateeb, who is also Saudi Arabia’s tourism minister, and CBRT head Şahap Kavcıoğlu, the SFD statement said.
Türkiye has been struggling with high inflation, which has been in a downward trend and fell to 55.18% in February, marking a fourth straight month of slowdown and the lowest level in a year.
Heading into presidential and parliamentary elections, scheduled for May 14, Erdoğan has pledged to ramp up spending in a swift campaign to rebuild the regions flatted by the February quakes within a year.
Close to 204,000 buildings collapsed or were severely damaged, leaving hundreds of thousands homeless.
According to the World Bank, the quakes and their aftershocks caused an estimated $34 billion in damage. The estimate does not include the eventual costs of reconstruction that are "potentially twice as large," the Washington-based institution said.